Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Unemployment Falls

Friday, 20th May, 2022

Daily Flows

  • Numerous ADI’s continued the hunt for funding in what was another frenzied day of activity yesterday.
  • ADI demand was spread broadly across domestic unrated to BBB+ rated names, with many still seeking funding today and proving negotiable on pricing to secure deposits.
  • A new unrated name who has never come to market for wholesale funds offered 1.70% for 3 months to middle market investors and 1.60% to FI’s, the highest rate we have seen so far at this term.
  • Bank of Queensland/ ME Bank increased their rates across the curve to what are now the highest levels across several terms.

Unemployment Falls

  • The unemployment rate in Australia is now 3.90%, falling from 4.00%.
  • Total employment only rose by 4000. Markets were expecting an increase of 30,000.
  • The discrepancy is due to a large shift within the market from part-time to full-time workers. Full-time employment rose 92,100, while part-time employment fell 88,400.
  • Most notably, underemployment continues to fall (now 6.10%) down 0.20%. During pandemic lows, this figure hit 12.60%.
  • Impressively, the unemployment rate in WA is a staggering 2.90%!
  • This print, combined with the wage growth data the day before, alleviates some of the pressure placed on the RBA to hike rates more aggressively.

Reference Rates Pull Back

  • Since Wednesday, reference rates have started to decrease, likely on the back of weaker than expected wage data.
  • 3-month BBSW has fallen from highs of 1.08% on Wednesday to 1.04% yesterday and holding at this level again today.
  • Without the current funding pressure ADIs are experiencing, term deposit rates would follow this trend.

Lawrence Vosper, Nicholas Allan

Curve Team